Code of Corporate Governance
May 2016
Introduction
The main principle underpinning the development of the new Delivering Good Governance in Local Government: Framework (CIPFA/Solace, 2016)
(‘the Framework’) continues to be that local government is developing and shaping its own approach to governance, taking account of the
environment in which it now operates. The framework is intended to assist authorities individually in reviewing and accounting for their own unique
approach. The overall aim is to ensure that resources are directed in accordance with agreed policy and according to priorities, that there is sound
and inclusive decision making and that there is clear accountability for the use of those resources in order to achieve desired outcomes for service
users and communities.
The Framework positions the attainment of sustainable economic, societal, and environmental outcomes as a key focus of governance processes
and structures. Outcomes give the role of local government its meaning and importance, and it is fitting that they have this central role in the sector’s
governance. Furthermore, the focus on sustainability and the links between governance and public financial management are crucial – local
authorities must recognise the need to focus on the long term. Local authorities have responsibilities to more than their current electors as they must
take account of the impact of current decisions and actions on future generations.
The Framework defines the principles that should underpin the governance of each local government organisation. It provides a structure to help
Individual authorities with their approach to governance. Whatever form of arrangements are in place, authorities should therefore test their
governance structures and partnerships against the principles contained in the Framework by:
 reviewing existing governance arrangements
 developing and maintaining an up-to-date local code of governance, including arrangements for ensuring ongoing effectiveness
 reporting publicly on compliance with their own code on an annual basis and on how they have monitored the effectiveness of their
governance arrangements in the year and on planned changes.
The term ‘local code’ essentially refers to the governance structure in place as there is an expectation that a formally set out local structure should
exist, although in practice it may consist of a number of local codes or documents.
To achieve good governance, each local authority should be able to demonstrate that its governance structures comply with the core and subprinciples contained in this Framework. It should therefore develop and maintain a local code of governance/governance arrangements reflecting the
principles set out.
It is also crucial that the Framework is applied in a way that demonstrates the spirit and ethos of good governance which cannot be achieved by rules
and procedures alone. Shared values that are integrated into the culture of an organisation, and are reflected in behaviour and policy, are hallmarks
of good governance.
The Framework applies to the annual governance statement prepared for the financial year 2016/17 onwards.
Principles of Good Governance
Principle A - Behaving with integrity, demonstrating strong commitment to ethical values, and respecting the rule of law.
Local government organisations are accountable not only for how much they spend, but also for how they use the resources under their
stewardship. This includes accountability for outputs, both positive and negative, and for the outcomes they have achieved. In addition, they have
an overarching responsibility to serve the public interest in adhering to the requirements of legislation and government policies. It is essential that,
as a whole, they can demonstrate the appropriateness of all their actions and have mechanisms in place to encourage and enforce adherence to
ethical values and to respect the rule of law
Sub-Principles
Behaviours and Actions that Demonstrate Good Governance in Practice
Behaving with integrity
Ensuring members and officers behave with integrity and lead a culture where acting in the public interest is visibly
and consistently demonstrated thereby protecting the reputation of the organisation.
Ensuring members and officers behave with integrity and lead a culture where acting in the public interest is visibly
and consistently demonstrated thereby protecting the reputation of the organisation.
Leading by example and using these standard operating principles or values as a framework for decision making and
other actions.
Demonstrating, communicating and embedding the standard operating principles or values through appropriate
policies and processes which are reviewed on a regular basis to ensure that they are operating effectively.
Demonstrating strong
commitment to ethical
values
Seeking to establish, monitor and maintain the organisation’s ethical standards and performance.
Underpinning personal behaviour with ethical values and ensuring they permeate all aspects of the organisation’s
culture and operation.
Developing and maintaining robust policies and procedures which place emphasis on agreed ethical values.
Ensuring that external providers of services on behalf of the organisation are required to act with integrity and in
compliance with high ethical standards expected by the organisation.
Sub-Principles
Behaviours and Actions that Demonstrate Good Governance in Practice
Respecting the rule of
law
Ensuring members and staff demonstrate a strong
commitment to the rule of the law as well as adhering to relevant laws and regulations.
Creating the conditions to ensure that the statutory
officers, other key post holders and members are able to fulfil their responsibilities in accordance with legislative and
regulatory requirements.
Striving to optimise the use of the full powers available for the benefit of citizens, communities and other
stakeholders.
Dealing with breaches of legal and regulatory provisions effectively.
Ensuring corruption and misuse of power are dealt with effectively.
Principle B - Ensuring openness and comprehensive stakeholder engagement.
Local government is run for the public good; organisations therefore should ensure openness in their activities. Clear, trusted channels of
communication and consultation should be used to engage effectively with all groups of stakeholders, such as individual citizens and service
users, as well as institutional stakeholders.
Sub-Principles
Behaviours and Actions that Demonstrate Good Governance in Practice
Openness
Ensuring an open culture through demonstrating, documenting and communicating the organisation’s
commitment to openness.
Making decisions that are open about actions, plans, resource use, forecasts, outputs and outcomes. The
presumption is for openness. If that is not the case, a justification for the reasoning for keeping a decision
confidential should be provided.
Providing clear reasoning and evidence for decisions in both public records and explanations to stakeholders
and being explicit about the criteria, rationale and considerations used. In due course, ensuring that the
impact and consequences of those decisions are clear.
Using formal and informal consultation and engagement to determine the most appropriate and effective
interventions/courses of action.
Engaging comprehensively with
institutional stakeholders
Effectively engaging with institutional stakeholders to ensure that the purpose, objectives and intended
outcomes for each stakeholder relationship are clear so that outcomes are achieved successfully and
sustainably.
Developing formal and informal partnerships to allow for resources to be used more efficiently and outcomes
achieved more effectively
Ensuring that partnerships are based on:
 Trust
 a shared commitment to change
 a culture that promotes and accepts challenge among partners
and that the added value of partnership working is explicit.
Sub-Principles
Behaviours and Actions that Demonstrate Good Governance in Practice
Engaging stakeholders
effectively, including individual
citizens and service users
Establishing a clear policy on the type of issues that the organisation will meaningfully consult with or involve
individual citizens, service users and other stakeholders to ensure that service (or other) provision is
contributing towards the achievement of intended outcomes.
Ensuring that communication methods are effective and that members and officers are clear about their roles
with regard to community engagement.
Encouraging, collecting and evaluating the views and experiences of communities, citizens, service users
and organisations of different backgrounds including reference to future needs.
Implementing effective feedback mechanisms in order to demonstrate how their views have been taken into
account.
Balancing feedback from more active stakeholder groups with other stakeholder groups to ensure inclusivity
Taking account of the interests of future generations of tax payers and service users.
Principle C - Defining outcomes in terms of sustainable economic, social, and environmental benefits.
The long-term nature and impact of many of local government’s responsibilities mean that it should define and plan outcomes and that these
should be sustainable. Decisions should further the authority’s purpose, contribute to intended benefits and outcomes, and remain within the limits
of authority and resources. Input from all groups of stakeholders, including citizens, service users, and institutional stakeholders, is vital to the
success of this process and in balancing competing demands when determining priorities for the finite resources available.
Sub-Principles
Behaviours and Actions that Demonstrate Good Governance in Practice
Defining outcomes
Having a clear vision which is an agreed formal statement of the organisation’s purpose and intended
outcomes containing appropriate performance indicators, which provides the basis for the organisation’s
overall strategy, planning and other decisions.
Specifying the intended impact on, or changes for, stakeholders including citizens and service users. It could
be immediately or over the course of a year or longer.
Delivering defined outcomes on a sustainable basis within the resources that will be available.
Identifying and managing risks to the achievement of outcomes.
Managing service users expectations effectively with regard to determining priorities and making the best use
of the resources available.
Sustainable economic, social
and environmental benefits
Considering and balancing the combined economic, social and environmental impact of policies, plans and
decisions when taking decisions about service provision.
Taking a longer-term view with regard to decision making, taking account of risk and acting transparently
where there are potential conflicts between the organisation’s intended outcomes and short-term factors such
as the political cycle or financial constraints.
Determining the wider public interest associated with balancing conflicting interests between achieving the
various economic, social and environmental benefits, through consultation where possible, in order to ensure
appropriate trade-offs.
Ensuring fair access to services.
Principle D - Determining the interventions necessary to optimise the achievement of the intended outcomes.
Local government achieves its intended outcomes by providing a mixture of legal, regulatory, and practical interventions. Determining the right mix
of these courses of action is a critically important strategic choice that local government has to make to ensure intended outcomes are achieved
They need robust decision-making mechanisms to ensure that their defined outcomes can be achieved in a way that provides the best trade-off
between the various types of resource inputs while still enabling effective and efficient operations. Decisions made need to be reviewed
continually to ensure that achievement of outcomes is optimised.
Sub-Principles
Behaviours and Actions that Demonstrate Good Governance in Practice
Determining interventions
Ensuring decision makers receive objective and rigorous analysis of a variety of options indicating how
intended outcomes would be achieved and including the risks associated with those options. Therefore
ensuring best value is achieved however services are provided.
Considering feedback from citizens and service users when making decisions about service improvements or
where services are no longer required in order to prioritise competing demands within limited resources
available including people, skills, land and assets and bearing in mind future impacts.
Planning interventions
Establishing and implementing robust planning and control cycles that cover strategic and operational plans,
priorities and targets.
Engaging with internal and external stakeholders in determining how services and other courses of action
should be planned and delivered.
Considering and monitoring risks facing each partner when working collaboratively including shared risks.
Ensuring arrangements are flexible and agile so that the mechanisms for delivering outputs can be adapted
to changing circumstances.
Establishing appropriate key performance indicators (KPIs) as part of the planning process in order to identify
how the performance of services and projects is to be measured.
Ensuring capacity exists to generate the information required to review service quality regularly.
Preparing budgets in accordance with organisational objectives, strategies and the medium term financial
plan.
Sub-Principles
Behaviours and Actions that Demonstrate Good Governance in Practice
Informing medium and long term resource planning by drawing up realistic estimates of revenue and capital
expenditure aimed at developing a sustainable funding strategy.
Optimising achievement of
intended outcomes
Ensuring the medium term financial strategy integrates and balances service priorities, affordability and other
resource constraints.
Ensuring the budgeting process is all-inclusive, taking into account the full cost of operations over the
medium and longer term.
Ensuring the medium term financial strategy sets the context for ongoing decisions on significant delivery
issues or responses to changes in the external environment that may arise during the budgetary period in
order for outcomes to be achieved while optimising resource usage.
Ensuring the achievement of ‘social value’ through service planning and commissioning. The Public Services
(Social Value) Act 2012 states that this is “the additional benefit to the community...over and above the direct
purchasing of goods, services and outcomes”.
Principle E - Developing the entity’s capacity, including the capability of its leadership and the individuals within it.
Local government needs appropriate structures and leadership, as well as people with the right skills, appropriate qualifications and mindset, to
operate efficiently and effectively and achieve their intended outcomes within the specified periods. A local government organisation must ensure
that it has both the capacity to fulfil its own mandate and to make certain that there are policies in place to guarantee that its management has the
operational capacity for the organisation as a whole. Because both individuals and the environment in which an authority operates will change
over time, there will be a continuous need to develop its capacity as well as the skills and experience of the leadership of individual staff members.
Leadership in local government entities is strengthened by the participation of people with many different types of backgrounds, reflecting the
structure and diversity of communities.
Sub-Principles
Behaviours and Actions that Demonstrate Good Governance in Practice
Developing the entity’s capacity
Reviewing operations, performance use of assets on a regular basis to ensure their continuing effectiveness.
Improving resource use through appropriate application of techniques such as benchmarking and other
options in order to determine how the authority’s resources are allocated so that outcomes are achieved
effectively and efficiently.
Recognising the benefits of partnerships and collaborative working where added value can be achieved.
Developing and maintaining an effective workforce plan to enhance the strategic allocation of resources.
Developing the capability of the
entity’s leadership and other
individual
Developing protocols to ensure that elected and appointed leaders negotiate with each other regarding their
respective roles early on in the relationship and that a shared understanding of roles and objectives is
maintained.
Publishing a statement that specifies the types of decisions that are delegated and those reserved for the
collective decision making of the governing body.
Ensuring the leader and the chief executive have clearly defined and distinctive leadership roles within a
structure whereby the chief executive leads the authority in implementing strategy and managing the delivery
of services and other outputs set by members and each provides a check and a balance for each other’s
authority.
Sub-Principles
Behaviours and Actions that Demonstrate Good Governance in Practice
Developing the capabilities of members and senior management to achieve effective shared leadership and
to enable the organisation to respond successfully to changing legal and policy demands as well as
economic, political and environmental changes and risks by:
 ensuring members and staff have access to appropriate induction tailored to their role and that
ongoing training and development matching individual and organisational requirements is available
and encouraged
 ensuring members and officers have the appropriate skills, knowledge, resources and support to fulfil
their roles and responsibilities and ensuring that they are able to update their knowledge on a
continuing basis
 ensuring personal, organisational and system wide development through shared learning, including
lessons learnt from governance weaknesses both internal and external.
Ensuring that there are structures in place to encourage public participation.
Taking steps to consider the leadership’s own effectiveness and ensuring leaders are open to constructive
feedback from peer review and inspections.
Holding staff to account through regular performance reviews which take account of training or development
needs.
Ensuring arrangements are in place to maintain the health and wellbeing of the workforce and support
individuals in maintaining their own physical and mental wellbeing.
Principle F - Managing risks and performance through robust internal control and strong public financial management.
Local government needs to ensure that the organisations and governance structures that it oversees have implemented, and can sustain, an
effective performance management system that facilitates effective and efficient delivery of planned services. Risk management and internal
control are important and integral parts of a performance management system and crucial to the achievement of outcomes. Risk should be
considered and addressed as part of all decision making activities. A strong system of financial management is essential for the implementation of
policies and the achievement of intended outcomes, as it will enforce financial discipline, strategic allocation of resources, efficient service
delivery, and accountability. It is also essential that a culture and structure for scrutiny is in place as a key part of accountable decision making,
policy making and review. A positive working culture that accepts, promotes and encourages constructive challenge is critical to successful
scrutiny and successful delivery. Importantly, this culture does not happen automatically, it requires repeated public commitment from those in
authority.
Sub-Principles
Behaviours and Actions that Demonstrate Good Governance in Practice
Managing risk
Recognising that risk management is an integral part of all activities and must be considered in all aspects of
decision making.
Implementing robust and integrated risk management arrangements and ensuring that they are working
effectively.
Ensuring that responsibilities for managing individual risks are clearly allocated
Managing performance
Monitoring service delivery effectively including planning, specification, execution and independent post
implementation review.
Making decisions based on relevant, clear objective analysis and advice pointing out the implications and
risks inherent in the organisation’s financial, social and environmental position and outlook
Ensuring an effective scrutiny or oversight function is in place which encourages constructive challenge and
debate on policies and objectives before, during and after decisions are made thereby enhancing the
organisation’s performance and that of any organisation for which it is responsible (OR, for a committee
system) Encouraging effective and constructive challenge and debate on policies and objectives to support
balanced and effective decision making.
Providing members and senior management with regular reports on service delivery plans and on progress
towards outcome achievement.
Sub-Principles
Behaviours and Actions that Demonstrate Good Governance in Practice
Ensuring there is consistency between specification stages (such as budgets) and post implementation
reporting (e.g. financial statements).
Robust internal control
Aligning the risk management strategy and policies on internal control with achieving the objectives.
Evaluating and monitoring the authority’s risk management and internal control on a regular basis.
Ensuring effective counter fraud and anti-corruption arrangements are in place.
Ensuring additional assurance on the overall adequacy and effectiveness of the framework of governance,
risk management and control is provided by the internal auditor.
Ensuring an audit committee or equivalent group or function which is independent of the executive and
accountable to the governing body:
 provides a further source of effective assurance regarding arrangements for managing risk and
maintaining an effective control environment
 that its recommendations are listened to and acted upon.
Managing data
Ensuring effective arrangements are in place for the safe collection, storage, use and sharing of data,
including processes to safeguard personal data.
Ensuring effective arrangements are in place and operating effectively when sharing data with other bodies.
Reviewing and auditing regularly the quality and accuracy of data used in decision making and performance
monitoring.
Strong public financial
management
Ensuring financial management supports both long term achievement of outcomes and short-term financial
and operational performance.
Ensuring well-developed financial management is integrated at all levels of planning and control, including
management of financial risks and controls.
Principle G - Implementing good practices in transparency, reporting, and audit to deliver effective accountability.
Accountability is about ensuring that those making decisions and delivering services are answerable for them. Effective accountability is
concerned not only with reporting on actions completed, but also ensuring that stakeholders are able to understand and respond as the
organisation plans and carries out its activities in a transparent manner. Both external and internal audit contribute to effective accountability.
Sub-Principles
Behaviours and Actions that Demonstrate Good Governance in Practice
Implementing good practice in
transparency
Writing and communicating reports for the public and other stakeholders in an understandable style
appropriate to the intended audience and ensuring that they are easy to access and interrogate.
Striking a balance between providing the right amount of information to satisfy transparency demands and
enhance public scrutiny while not being too onerous to provide and for users to understand.
Implementing good practices in
reporting
Reporting at least annually on performance, value for money and the stewardship of its resources.
Ensuring members and senior management own the results.
Ensuring robust arrangements for assessing the extent to which the principles contained in the Framework
have been applied and publishing the results on this assessment including an evidence to demonstrate good
governance (annual governance statement).
Ensuring that the Framework is applied to jointly managed or shared service organisations as appropriate.
Ensuring the performance information that accompanies the financial statements is prepared on a consistent
and timely basis and the statements allow for comparison with other similar organisations.
Assurance and effective
accountability
Ensuring that recommendations for corrective action made by external audit are acted upon.
Ensuring an effective internal audit service with direct access to members is in place which provides
assurance with regard to governance arrangements and recommendations are acted upon.
Welcoming peer challenge, reviews and inspections from regulatory bodies and implementing
recommendations
Sub-Principles
Behaviours and Actions that Demonstrate Good Governance in Practice
Gaining assurance on risks associated with delivering services through third parties and that this is
evidenced in the annual governance statement.
Ensuring that when working in partnership, arrangements for accountability are clear and that the need for
wider public accountability has been recognised and met.